The Transport Insurance Order (2011-839) was published in the Official Journal on July 16 2011. It is based on Section 77 of the Law on Banking and Financial Regulation (October 22 2010), which empowers the government to amend Title VII of Book I of the Insurance Code, notably with regard to the insurance of non-marine risks in fields such as aviation and aerospace.
The new order updates the rules applicable to transport insurance. Therefore, the reform aims not only to harmonise the insurance legal regime for transported goods, but also to compensate for the lack of rules specifically dedicated to aviation and aerospace risks. It widens the scope of Title VII to include insurance contracts relating to aviation and aerospace, and clarifies the scope of liability for aviation and aerospace activities.
As part of the progress towards the multimodality of goods transportation, the reform is designed to increase the international competitiveness of the French insurance legal regime.
The regulation of transport insurance, traditionally excluded from the Insurance Code, dates back to the Marine Insurance Law (1967-522), which was codified into Title VII of Book I of the Insurance Code. An insurance regime for river and lake transport was added by Law 1992-665.
The Marine Insurance Law created a balance between necessary contractual freedom in order to adapt to a constantly changing global market, and the protection of the insured party's interests, which sustains the attractiveness of the French legal regime. Furthermore, the carrier's liability insurance and goods damage insurance were subject to a unique regime resulting from Titles I and II of Book I of the Insurance Code, entitled, "Common rules related to non-marine risks insurance and personal insurance" and "Rules related to non-marine risks insurance", respectively.
Therefore, aviation and aerospace insurance was not covered by these provisions. This lack of specific regulation caused legal uncertainty, leading to a lack of legal foreseeability and harming the competitiveness of the French market in the field.
The innovations brought about by the Transport Insurance Order lie in:
- the application of Title VII of Book I of the code to all insurance policies covering damage to goods without regard to the means of transportation (although carrier's liability insurance remains subject to Titles I and II); and
- the insertion of two new chapters creating an aviation and aerospace insurance regime within the aforementioned title.
The order has three key aims, as set out below.
Increasing the international attractiveness of the French insurance legal regime
Article 8 of the order introduces two new chapters: one devoted to aviation risks (new Articles L.175-1 to L.175-29), and the other devoted to personal liability risks regarding aerospace operations (new Articles L.176-1 to L.176-5).
Concerning aviation risks, Section 1 of Chapter 5 (new Articles L.175-1 to L.175-13) relates to general provisions (notably, the computation of the insured value - new Articles L. 175-5 to L. 175-9). Section 2 of the same chapter (new Articles L.175-14 to L.175-18) concerns the insured party's duties. In case of an increase in hazards, Section 2 deals with the insured's duties of declaration at the time of concluding the contract or during the execution of the contract. Section 3 (new Articles L.175-19 to L.175-29) is devoted to the insurer's duties.
With regard to aerospace operations, Chapter VI deals with liability insurance relating to this type of operation. This chapter refers back to the provisions of Chapter V applicable to liability insurance. Certain characteristics peculiar to the aerospace field are introduced in new Articles L.176-2 to L.176-5.
Contributing to the progress towards the multimodality of goods transportation
The creation of a unique insurance regime with regard to transported goods, whatever means of transportation is used, including ground transportation, simplifies the insurance terms of transported goods (Article 5 of the order).
Article 5 clarifies the list of usual exclusions of marine and fluvial insurance or transported goods contracts coverage. New Article L.172-16 maintains only the exclusions related to goods insurance. Furthermore, new Article L.172-16-1 maintains the exclusion with regard to liability insurance - such insurance does not cover damages caused by insured goods to other goods or persons (in the absence of any agreement stating otherwise).
Guaranteeing the insured party's interests
Although the insured party is often a powerful professional client as far as transportation is concerned, the attractiveness of the French insurance legal regime is also based on the need to protect the insured party's interests.
In addition, third parties' interests are not neglected. Hence, Article 6(X) of the order supplements Article L.173-23 of the Insurance Code by introducing, with regard to maritime, river and lake transportation, a right of direct action lawsuit for the prejudiced third party against the insurer which covers the liable party's personal liability.
The new provisions embodied in the order will apply only to contracts concluded or renewed (whether tacitly or not) from July 1 2012 (Article 11).
As a result of consistent jurisprudence from the Supreme Court, the renewal of a contract (whether tacitly or not) does not extend the initial contract, but rather gives rise to a new agreement (eg, see Court of Cassation, Commercial Chamber, March 13 1990, Case 88-18.251). Therefore, the application of the order to renewed contracts from its effective date is consistent with the legal perception of the renewal of a contract as the conclusion of a new agreement.
For further information on this topic please contact Carole Sportes at BOPS (SCP Bouckaert Ormen Passemard Sportes) by telephone (+33 1 70 37 39 00), fax (+33 1 70 37 39 01) or email ([email protected]).